Equity, Debt or…nothin?
To borrow or not to borrow?
To find equity partners or bootstrap it? These questions are the hot topic of any company who is looking to expand their market, their product offering or their services. Like most things, it takes conscious capital – financial and human capital.
Some businesses are fortunate enough to have launched with enough steam and runway to not require any external financing up to a point, or they have an army of family members who are eager to help you get your business off the ground. Many reinvest their earnings and keep supporting the business through personal sacrifice and delayed compensation. Others lean on more friends and family to help with services, manufacturing, delivery of goods, etc. This should be applauded, but it’s not a long-term strategy for growth, as cashflow and human resources eventually run thin or simply run out.
There comes a time when every business owner hits a fork in the road.
They have depleted their internal resources, they have called in every deal, and every favor…now it’s time to put all the cards on the table and decide how the next stage of the company’s growth should be executed, implemented and funded. Many people struggle with the fact that they will require an external source of financing. Some don’t like debt, but forget that it is non-dilutive. Some prefer equity as it can bring in strategic money and expertise that they would not otherwise have access to, and others will still try to bootstrap their way along. When we speak about the requirements for capital, I think we can all agree that in one form or another, capital is vital and the lifeblood of the growth story of a business.
How do you strike a balance with the capital requirements, running the business, and still sleep at night? It involves careful consideration and consultation with those who have done this many times before. Professional consultants who perform business evaluations and help determine how and where you can put new capital, while helping establish how much capital you need for the next step, are fundamental. Regular bankers are order takers and provide limited solutions. They serve a purpose, but not a very large menu of options or expert advice. Any smart business owner will validate that they would rather take advice from someone who has both operated a business and funded a business, over someone who only understands their own side of the transaction. Let us be clear, as we always are on this subject…bankers serve an important part of our ecosystem, but they are a cog in the wheel a bit farther down the line. They will tell you what you may or may not qualify for, but they cannot provide a suggestion on how much capital you actually need.
Every company needs capital, period.
Maybe not today, maybe not tomorrow…but you’re kidding yourself if you think you won’t need it. Perhaps you have a bottomless trust fund that no one knows about or tons of family who love working for you for free, but for the majority of us living in the real world, you need to be prepared. Don’t wait until the 11th hour to figure out your capital plan…better to plan ahead and not need it right away than to not plan and find yourself scrambling.
The UnBankers aren’t here just to fund you, we are here to help you avoid the unnecessary stresses of securing the essential human or financial capital you are going to require.